Home Buying in Union>Question Details

Gloria, Home Buyer in New Jersey

We are buying a home which has an underground oil tank. We understand that if the tank is tested and there

Asked by Gloria, New Jersey Wed May 6, 2009

is a problem ,DEC will get involved and this will be a very complicated situaion. What if we buy a new tank and place it in the basement, are we obligated to have the old oil tank tested? We are planning to have the old tank filled with sand and left in the yard.

Help the community by answering this question:

Answers

11
Gloria and all,

Regardless of whether the oil tank is active or not, it needs to be removed prior to closing. If it is active, it should be replaced with an above ground model.

The so-called tank insurance that is offered by oil companies is not worth the paper that it is printed on. It is more of a service contract than an insurance policy. If the oil tank leaks into an aquifer, the costs to remediate run into the hundreds of thousands and involve massive removal of soil. These "insurance policies" don't cover anything like that. Read the limitations and exclusions of any of these policies and you will see that they are pretty much worthless.

Also all oil tanks leak. It is just a matter of when. An underground oil tank is an expensive ticking time bomb. So even if it tested fine and indeed was not leaking, it STILL should be removed by the seller prior to closing. I would go so far as to say that as listing agents, we should not list a property with an underground oil tank where the seller does not agree to remove it prior to closing. It is a huge defect in this market. Attorneys advise against closing with it. Homeowners insurance companies are starting to refuse to cover homes with UST's. It is not a stretch to predict that in the future it may become impossible to obtain homeowners insurance with an underground storage tank. And in fact, some mortgage companies are now starting to refuse to write mortgages on properties with UST's.

So even for future resale considerations, it is vital to remove this defect.

As listing agents, I believe we are providing inadequate service if we do not advise sellers of this reality when we take the listing. As a buyer's agent, I simply will not let my buyer place an offer on a home with a UST unless we stipulate removal. Many agents are starting to do this. It is a good thing.

-Marc

Marc Paolella
Relocation Director
Member, Worldwide ERC
Licensed Realtor NJ
Licensed Appraiser NJ & NY
Century 21 Joe Tekula Realtors
Agent of the Year 2008
Owner: Sands Appraisal Service, Inc.
Phone (direct): (973) 584-4235
Search the Garden State MLS: http://www.marcpaolella.com/SearchMLS
3 votes Thank Flag Link Thu May 7, 2009
You should have the seller remove the tank, if they refuse and you plan to continue using the tank you should have a tightness test performed on the tank. With passing results of the tightness test you should buy a $100,000 policy on the tank from ProGuard. If you plan to remove the tank and install an aboveground tank you should hire an inspection company to do soil borings around the tank. The soil should be sent to a laboratory for analysis to determine if petroleum is in the soil. If the results show the ground is hot the current owner of the house will have no choice and will have to remove the tank and clean-up the soil and of course install a new tank. The good news is New Jersey has a grant program that will pay for most of the cost of removal and installation of a new tank. Most people meet the financial requirements to obtain the grant money. You can apply for the grant on-line or use a service like ours to apply for you. Companies like mine will pre-qualify you and guarantee that you meet the guidelines. Some companies like mine will front the $3000 grant money to avoid you from have a large out of pocket expense while you are waiting for the grant money. The process of replacing the tank can be completed in 4 weeks or less with the longest time being obtaining the township permits. Contrary to what most people believe the new tank is installed in one day and the tank is removed in one day. If the tank was found to be leaking New Jersey under another program will pay any expense not covered by insurance. There is no cap on the reimbursement amount from the state.
Please use testing companies licensed by New Jersey and make sure the inspector also has a license. You should always ask how long the testing company has been in business and do they have an "errors and commissions" policy. The lowest price to do this type of inspections may not be best judge of whom you use.
1 vote Thank Flag Link Thu Jul 23, 2009
Gloria, It is the DEP that will get involved if there is a leak. There is a BUST (bureau of underground storage tanks who will oversee clean up)
Testing is not perfect and will not guarantee there hasnt been leaks or spillage except exactly where they test. Contamination could exist inches, feet or miles away. Before you buy ,have them remove the tank. especially if it is the old single wall steel type. The newer cathodic protected double wall tanks that have interstitional monitors and overfill protection is the only type of underground tank I would be inclined to trust but then you have to know that the piping from tank is also double wall.
Roth manufactures tanks for above ground inside or outside (with a rain shield) use. Their tanks come with as I recall $1,000,000 insurance and are basically plastic tanks within a galvanized outer tank.
Dont leave the old tank or abandon in place as you are merely delaying the inevitable and the costs could mount.
1 vote Thank Flag Link Thu May 7, 2009
Hi Gloria,

Yes! You are obligated by common sense to have it tested. In fact, you should absolutely not buy the house unless the oil tank is removed. A tank could have leaking and still test successfully. The liabilities could be enormous. Plus you will have the problem of dealing with the issue again when you go to sell.

Your agent should be advising you not to buy the house unless the tank is removed prior to closing. If the sellers will not remove it, you should move on to another house. Homeowners insurance and mortgages are becoming harder and harder to secure for homes with underground fuel tanks. At some point, there is a good chance that homeowners insurance will be cancelled for homes with UST's. Don't risk it. Have the sellers remove it. If you want to pay for it that is up to you, but it is not wise to buy a home with a UST.

-Marc

Marc Paolella
Relocation Director
Member, Worldwide ERC
Licensed Realtor NJ
Licensed Appraiser NJ & NY
Century 21 Joe Tekula Realtors
Agent of the Year 2008
Owner: Sands Appraisal Service, Inc.
Phone (direct): (973) 584-4235
Search the Garden State MLS: http://www.marcpaolella.com/SearchMLS
1 vote Thank Flag Link Wed May 6, 2009
Regardless of whether the oil tank is active or not, it needs to be removed prior to closing. If it is active, it should be replaced with an above ground model.
0 votes Thank Flag Link Thu Feb 21, 2013
I would think you would have to have it tested.
0 votes Thank Flag Link Thu Feb 21, 2013
oil tanks are a real nightmare-Even if the seller agrees to have it fill up with sand-the next person whom is going to buy it may not want it under the ground period...I stongly suggest you remove it....see if the owner will pay for it. the epa has a program to help for the removal of oil tank call them-it may cover all the cost.
wish you the best -
nicaury@nicaury.com
Web Reference: http://www.nicaury.com
0 votes Thank Flag Link Wed Jul 22, 2009
Gloria: Sad to say, Marc is probably right. (I'm not sorry about Marc’s being right, I'm sorry that the situation seems to be heading in the way he describes.) The underground storage tank is an idea whose time has "went." Our mutual colleague, Ken Verbeyst has a horror story of HUNDREDS of thousands spent on ONE tank! I sold a property with an underground tank just last fall but only to a second investor, the first being wise enough to drop the purchase. I note that the second investor is flipping the property now.

The in-ground tank is not illegal as it stands now but who knows when it will be? There is funding available for removal and if there is no contamination, you're home free with little cost, in comparison to the cost of the property. There is, of course, the gamble that there is contamination and additional costs but if you gamble, don't fix the problem and the situation gets worse, you face higher costs in the future.

Filling the tank with sand is not an especially good idea. Twenty years ago, it may have been ok, since at that time few underground tanks in residential properties were failing. Now, the problem is well known and to fail to disclose a known detrimental condition would open liability to legal action. The procedure itself is not cost free. You have to dig up the top of the tank, cut it open (It's very hard to get the sand into an old tank through the fill pipe) and shovel the sand in. Finally you have to back fill the hole. This costs money too and since there is the state funding available for removal, it would seem silly to fool around with a half measure that was just more trouble waiting to happen.

I'm a minimum cost kind of guy but in this case, I think the appropriate minimum is removing the tank before purchase. If the seller can't or won't do it, add it to the cost of purchase and figure you offer accordingly.

Best of Luck.

Bill
0 votes Thank Flag Link Thu May 7, 2009
Gloria,

Our recommendation is to resolve the problem prior to buying this home. As previously mentioned, the scope of the problem you will be embracing could exceed your wildest imagination.

Resolve the issue now............

Good luck
0 votes Thank Flag Link Thu May 7, 2009
Gloria
Just to clarify something.
Certainly, if the oil tank is the current source of fuel for heat for the home, you are not obligated to remove it!
You definitely need to have it & the soil tested, though.
If the oil tank is not currently being used, then that tank should be removed properly by a licensed contractor. You will need that paperwork when going to sell the home in the future.
Many homes are heated by oil stored in an underground tank - just make sure the one in the home you are contemplating buying is in sound condition. Many oil companies offer insurance to cover the tank. Look into all of this before proceeding.
0 votes Thank Flag Link Wed May 6, 2009
Gloria, HI
The question shouldn't be "IF the tank is tested"....but ....WHEN it is tested. It would be foolish to buy a home without having the tank tested BEFORE you close. If oil has leaked from the tank, it is a big environmental issue, and the seller should be responsible for any remediation. If it is an active tank, the seller might even have insurance which would cover any leakage . You can't just forget there is an underground tank and put a new one in the basement. Proper paperwork needs to be done to remove or fill in any existing tank, and yes, teating is part of that. Questions about underground tanks are part of most seller's disclosures now used when listing a home.
If you were working with an agent, I am sure this would have been made clear to you. If you are purchasing a home on your own, seek legal advise before finalizing anything in regard to the tank and any other pertinent issues. Having an abandoned oil tank is something that needs to be addressed now, prior to closing!
Good luck - and get some legal advice!
Debbie
0 votes Thank Flag Link Wed May 6, 2009
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer